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Strategies to manage cash conversion cycle includes:
1. Reduce the average age of inventory. improve their inventory conversion period by making goods and selling them faster through more efficient processes. Avoiding inventory shortages or stockouts helps too.
2. Reduce the average collection period. speed up collections on accounts receivable.
3. Increase the payables deferral period. Pay accounts payable slowly as possible without harming credit rating or relationships with supplier.
4 Use technology, strategic partnerships and other leverages effectively. Use technology to collect payments, make product or any other use of technology which improves efficiency.
The shorter the cash conversion cycle, the better we are managing the business cash flow.
